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Customer complaints costing more than ever

By Patrick Brusnahan January 26, 2018

Customer service is incredibly important in the financial sector. Service is not only a differentiator in a congested marketplace, but complaints are costly to resolve. According to the Financial Ombudsman, banks and other financial services know this to be very true. Patrick Brusnahan writes

As digital solutions become more prevalent in several industries, consumers expect more from their services. As a result of expecting more, they can also be disappointed more.

Customer experience firm Servion, collaborating with the Financial Ombudsman, found out that the percentage of complaints that result in financial compensation grew in the past year. In financial services, it rose by 4% in 2016 to 79.5% of all complaints in 2017.

For comparison, it grew by 15% to 82% in communications and by 5% to 87% in the energy sector.

However, complaints as a whole fell by 25% compared to the previous year. This has been attributed to the decrease in PPI complaints.

“Consumers will no longer accept a poor customer experience, hidden costs, or sub-standard services – and organisations that aren’t keeping up are paying a heavy price,” said Shashi Nirale, SVP & GM EMEA at Servion.

“Paying out for the majority of customer complaints is simply not sustainable. Businesses must look at new ways of engaging with customers – using new technologies such as AI and robotics – to ensure they receive personalised, up-to-date and efficient service. Those that fail to do so will see profits fall, as increasingly disloyal customers seek out their competitors.”

While 2017 had the lowest of amount of complaints in recent years, counting at 336,381, there are still areas in need of improvement. For example, while complaints regarding PPI fell slightly in 2017, from 56% to 52.5% of all complaints, the vast majority of complaints still revolve around this complex insurance product. Consumers may need to be educated further to lower the amount of complaints on this matter.

One thing that has been improved is speed of resolution. 65% of all complaints were resolved within three months in 2016/2017, compared to 38% in 2015/2016.

Certain segments saw an increase in complaints over the past year. Complaints about instalment loans, payday loans, and electronic payments all saw a rise, 318% 227% and 73% respectively.

The big banks also received a lot of new cases brought to the Financial Ombudsman between January and June 2017. Bank of Scotland and Lloyds were at the top with 20,541 and 18,068 new cases respectively.

On average, 36% of cases are resolved by the Ombudsman but not many UK-based banks beat this percentage. Santander had 43% of cases against it resolved and HSBC customers had 40% of their cases resolved.

However, only 21% of complaints brought against TSB were resolved. Bank of Scotland fared slightly better with 22%, followed by Metro Bank at 28%.

“No matter whether you’re a telco in the communications sector, a bank in the financial services or an energy provider, it’s simply not sustainable for organisations to continue offering disconnected customer service and complex billing options,” explains Nirale.

“If companies continue to offer a substandard customer experience, they will continue to pay out to dissatisfied customers, damaging their customer retention and profit margins in the process.”

He adds: “As this data from the Ombudsmen services shows, companies that continue to offer a substandard customer experience are making a costly mistake. Not only are their finances suffering, but their reputations are taking a similar nosedive.

“Today, customers expect communications and services tailored to them, even when – in fact, especially when – their experience has already been poor. We are in a digital age, and technologies to help companies improve customer experience are available and affordable. There is no excuse for businesses that fail to meet rising customer expectations.”

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